Economics Essay Example: Is Walmart Good for America?

Walmart, founded in 1962 by Sam Walton, is one of the leading retailers and the largest corporations in America and the world. A debate on whether Walmart is good or bad for America has been in existence for some time. Some people argue that it reduces the living standards of Americans and hurts the retail trade. Others contend that it has improved Americans life, lowered the price of goods, created employment opportunities, and enhanced the health of populations. However, what these people fail to understand is that Walmart costs jobs in many ways, which in turn, hurts the economy. For instance, on the subject of globalization, it costs jobs because it has led to the decline of manufacturing industries across the US since it is the largest importer of goods. The paper focuses on whether Walmart is good for America in an economical point of view. Also, it discusses the rise of e-commerce retailers, its comparative advantage to other retailers, outsourcing, industry lobbying as well as policy making. Walmart is bad for America because it deteriorates the economy and leads to unemployment.

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Over the last decade, e-commerce companies have taken over the consumer market. It is evidently reflected on the growth of internet sales. The growth of firms such as Amazon, Walmart, and E-bay is a good example of how evolution has taken place within the e-commerce marketplace. As it appears, most retail stores have huge volume sales and healthy turnover due to international markets. Before, craftspeople would sell their products directly to people. Afterward, they specialized in vendors who could expand their markets, and their sales reach, which became the best innovation in the retailing industry. Nevertheless, Walmart has grown to be the best retail company and has a higher comparative advantage to other retailers.

Walmart transformed the retail industry by bringing in information technology, which made it have a higher comparative advantage to other retailers. Smith (2004) asserts that the introduction of IT, computers, and the adoption of universal barcode put retailers ahead of manufacturers. As he explains, Walmart made use of the information hidden in the barcode, which made it on top of all retailers, suppliers, and helped them understand what consumers want. Moreover, the author affirms that Walmarts ability to foretell seasonal trends has made them adapt to the product mix and the demographics of local shoppers. The author emphasizes that Walmarts mastery of IT and logistics boosted its supply chain from factories to shelves, making faster deliveries from their suppliers to cut down on time wasted in warehouses. Apparently, a large number of traditional retailers are struggling to become profitable because they have a difficult time securing customer involvement across their channels.

Over the years Walmart has boosted global outsourcing. According to Smith (2004), Gary Gereffi, a University professor at Duke who supplies global supply chains affirms that Walmart is one of the key forces that offshored US jobs because of its ability to control much purchasing power from the US economy. The other reason Gary Gereffi puts forward to Walmarts global outsourcing since it is the number one supplier-retailer of most of Americas consumer goods. Despite that notion that outsourcing saves Walmart operational costs, it affects the US employment sector, which hurts the economy in the long run. Interestingly, Walmart prefers to deal with the Chinese and other suppliers. Among all their suppliers, 80% are based in China. China and other countries in Asia have the most consumerist economy in the world due to the demand for Walmart stores. Ideally, despite the advantages Walmart receives from outsourcing, the American market becomes minute, and the economy depreciates.

Walmart has spent a lot of money lobbying in many countries. In India, for example, Walmart faces criticisms over the notion that it gained entry into its markets indirectly (Mahaprashasta, 2013). As the author avows, the desperation of Walmart to enter Indias market is understandable, but also depicts an infringement of the countrys sovereignty. On the other hand, the president, Donald Trump, in his 2016 presidential campaign mentioned that he would bring jobs back to the US. If so, it would mean that if he imposes those policies, US companies would become less competitive, move their operations overseas, and others would go out of business. Outsourcing firms such as Walmart keep labor costs cheap, and when they ship their goods back to the US, prices become low, which hugely impacts the economy. As Thoma (2006) affirms, the loss of manufacturing jobs and environmental damage are the consequences of low prices of goods. On the real sense, the demand for low prices puts Walmart in a subsiding lucrativeness and America in a worse economic stand.

In summary, Walmart does more harm than good to the American economy. As mentioned in the paper, Walmart concentrates a lot in the retail sector, and have large stores that hurt Americas economy by reducing property value and devaluing businesses that do not benefit from them. More so, Walmart does not focus on people who buy goods from them. Instead, they concentrate more on making profits for its owners and shareholders. Additionally, the day Walmart became Chinas counterparts, a significant part of Americas economy became dispensable. Not to mention, despite the fact that most people affirm that Walmart has low prices, the manner in which they do it deteriorates the American economy slowly.

References

Mahaprashasta, A. A. (2013). Business by other means. Frontline, vol. 30. issue 1. Retrieved

from http://www.frontline.in/static/html/fl3001/stories/20130125300104800.htm

Smith, H. (2004). Who Calls the Shots in the Global Economy? Retrieved from

http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secrets/shots.html

Thoma, M. (2006). The Wal-Mart Conundrum. Economist View. Retrieved from

http://economistsview.typepad.com/economistsview/2006/04/the_costs_and_b.html